References and Guarantors

16 February 2023

References

References must be obtained on applicants to establish certain facts about them including, for example, they are who they say they are, their employment is as stated and they are able to afford the rent. Although references do not guarantee the performance of the tenant, nor that they will pay the rent. The tenant application form should contain a clause whereby the applicant gives consent to their employer, bank and others being approached for a reference. A credit reference agency may be used to obtain references, if not, references from the following sources should be obtained:

• Credit reference: obtained by using a credit reference agency, often used by agents to outsource their referencing. This will register whether the applicant has any county court judgements against them.
• Previous landlord (where there is one): to establish amount of rent paid, whether there was any arrears, condition of the property at the end of the tenancy and whether they complied with their tenancy terms
• Employer: to confirm the applicant is working for the company, their position, length of employment, current salary and permanency of role or contract
• Bank: to advise them of the rental amount, length of tenancy and whether rent is to be paid in full by the applicant or shared with others
• Accountant, if self employed

Corporate Applicants

If the potential tenant is a company, agents should obtain references on the company to assess their creditworthiness. If the company is well known, the landlord may not be concerned about obtaining references. If this is the case, the agent should ask the landlord to sign an indemnity regarding this.

Guarantors

Some applicants may be unable to provide suitable references due to having a poor credit rating, for example. In this case, the landlord may decide to go ahead with the tenancy providing the applicant has a guarantor i.e. someone who will take on the tenant’s debt relating to the property if they fail to pay it. A guarantor must be resident, and have a bank account, in the UK and be referenced to ensure they are financially capable of taking on the debt. A guarantor agreement may require them to pay rent arrears only or may require they guarantee against any financial loss the landlord might suffer. Agents must ensure they have the guarantors signed documents in their possession prior to the start of the tenancy and must ensure a copy of the tenancy agreement was given in time for the guarantor to seek advice if necessary prior to signing.

Applicants Without References/Guarantor

If an applicant is unable to provide full references or a guarantor the landlord must be fully advised so they can make a decision about proceeding. The landlord should sign an indemnity relating to the fact that references could not be obtained stating that the landlord is aware of the situation, wishes the tenancy to proceed and will not hold the agency liable if the tenant does not pay the rent or otherwise breaches their agreement.

An applicant may, of course, be able to pay the full fixed term rent in advance. If so, at the end of the term the tenant would have to pay a further full term in advance to renew or references should be taken.